Perception and Decision

Making
Perception
 Perception
 A process by which individuals organize and
interpret their sensory impressions in order to give
meaning to their environment
 Perceptual processes differ across individuals
 Perception is basis of meaning
 Behaviors are based on perceptions, not on
reality
 Perception

Source: Robbins, 2001

Shortcuts in Perception
 Selectiveperception
 Categorical thinking

 Mental models
Social Identity Theory
 Personal identity
 Social identity

 Social perceptions
 Categorization
 Homogenization
 Differentiation
 Stereotyping
Errors in Perception
 Primacy effect
 Recency effect

 Projection

 Halo effect

 Contrast effect
Attribution Theory
 How do people determine the source or cause of
others’ behaviors?
 Internal attribution
 External attribution

 Distinctiveness: shows different behaviors in

different situations.
 Consensus: response is the same as others to
same situation.
 Consistency: responds in the same way over time.
 Attribution Theory

Source: Robbins, 2001

Attribution Theory
 Errors in attributions
 Fundamental Attribution Error
 The tendency to underestimate the influence of
external factors and overestimate the influence of
internal factors
 Self-serving Bias
 The tendency for individuals to attribute their own
successes to internal factors while putting the blame
for failures on external factors
The Link Between Perceptions
and Individual Decision Making
Problem
A perceived discrepancy
between the current state of
affairs and a desired state Perception of
the Decision
Decisions Maker
Choices made from among
alternatives developed from
data perceived as relevant

Outcomes
The Classical Model of
Decision Making
1. Identify and define the Problem

2. Identify decision criteria

3. Allocate weights to criteria

4. Develop alternatives

5. Analyze alternatives

6. Select the “best” alternative

7. Implement the alternative

8. Evaluate decision effectiveness

 Classical Model of Decision
Making
Single, well-
defined goal
is to be achieved
All alternatives Problem is
and clear and
consequences are unambiguous
known
Assumptions of
rationality in
Preferences
classical decision Final choice
making model will maximize
are clear
payoff

Preferences
No time or cost
are constant
constraints exist
and stable

Source: Robbins, 1999

Behavioral Model of Decision
Making
 Classicalmodel is “prescriptive”: It tells
managers what they should do
 Behavioral model is “descriptive”: It tells us
how managers actually make decisions
 Managers attempt to be rational, but
 assumptions of complete rationality are relaxed
(i.e., we know managers don’t have complete and
accurate information) – “bounded rationality”
 Making Choices: Rational vs OB

Goals Rational: Clear, compatible, agreed upon

OB: Ambiguous, conflicting, lack agreement

Processing
Rational: People can process all information
Information
OB: People process only limited information

Evaluation
Rational: Choices evaluated simultaneously
Timing
OB: Choices evaluated sequentially

Source: Shane & Von Glinow, 2005

 Making Choices: Rational vs OB

Standards Rational: Evaluate against absolute standards

OB: Evaluate against implicit favorite

Info Quality Rational: People rely on factual information

OB: Rely on perceptually distorted information

Decision
Rational: Maximization -- the optimal choice
Objective
OB: Satisficing -- a “good enough” choice

Source: Shane & Von Glinow, 2005

Behavioral Model of Decision
Making
 How do managers actually make decisions?
 They satisfice rather than optimize
 They use their intuition
 They act politically (e.g., coalitions)
 They take risks
 They escalate their commitment
 They have their own decision making styles
 They use heuristics
 How Are Decisions Actually Made
in Organizations?
 How/Why problems are Identified
 Visibility over importance of problem
 Attention-catching, high profile problems
 Desire to “solve problems”
 Self-interest (if problem concerns decision maker)
 Alternative Development
 Satisficing: seeking the first alternative that solves
problem
 Engaging in incremental rather than unique
problem solving through successive limited
comparison of alternatives to the current
alternative in effect
Common Biases and Errors
 Overconfidence Bias
 Believing too much in our own ability to make
good decisions

 Anchoring Bias
 Using early, first received information as the
basis for making subsequent judgments

 Confirmation Bias
 Using only the facts that support our decision
Common Biases and Errors
 Availability Bias
 Using information that is most readily at hand
 Recent
 Vivid

 Representative Bias
 “Mixing apples with oranges”
 Assessing the likelihood of an occurrence by
trying to match it with a preexisting category using
only the facts that support our decision
Common Biases and Errors
 Escalation of Commitment
 In spite of new negative information, commitment
actually increases

 Randomness Error
 Creating meaning out of random events

 Hindsight Bias
 Looking back, once the outcome has occurred,
and believing that you accurately predicted the
outcome of an event
Intuition
 Intuitive Decision Making
 An unconscious process created out of distilled
experience
 Conditions Favoring Intuitive Decision
Making
 A high level of uncertainty exists
 There is little precedent to draw on
 Variables are less scientifically predictable
 “Facts” are limited
 Facts don’t clearly point the way
 Analytical data are of little use
 Several plausible alternative solutions exist
 Time is limited and pressing for the right decision
Ways to Improve Decision
Making
1. Analyze the situation and adjust your decision
making style to fit the situation.
2. Be aware of biases and try to limit their impact.
3. Combine rational analysis with intuition to increase
decision-making effectiveness.
4. Don’t assume that your specific decision style is
appropriate to every situation.
5. Enhance personal creativity by looking for novel
solutions or seeing problems in new ways, and
using analogies.
Toward Reducing Bias and
Errors
 Focus on goals.
 Clear goals make decision making easier and
help to eliminate options inconsistent with your
interests.
 Look for information that disconfirms
beliefs.
 Overtly considering ways we could be wrong
challenges our tendencies to think we’re smarter
than we actually are.
Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control
of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164–68.
Toward Reducing Bias and
Errors
 Don’t try to create meaning out of random
events.
 Don’t attempt to create meaning out of
coincidence.
 Increase your options.
 The number and diversity of alternatives
generated increase the chance of finding an
outstanding one.

Source: S.P. Robbins, Decide & Conquer: Making Winning Decisions and Taking Control
of Your Life (Upper Saddle River, NJ: Financial Times/Prentice Hall, 2004), pp. 164–68.
Common Biases in Decision
Making
 Heuristics are “rules of thumb”
 The availability heuristic: use information that is
easily recalled
 The representativeness heuristic: categorize and
stereotype based on limited information (e.g., you
can tell a book by its cover)
 The anchoring and adjustment heuristic: place too
much weight on initial information
Source: Prentice-Hall 2003
Common Biases in Decision
Making
 Escalation of Commitment
 The tendency of decision makers to invest
additional time, money, or effort into what are
essentially bad decisions or unproductive courses
of action that are already draining organizational
resources.
Common Biases in Decision
Making
 Escalation of commitment
occurs because of…
 Ego / Self-justification
 Sunk costs fallacy
 Gambler’s fallacy
 Stopping costs
 Perceptual filters
 To help resolve and
prevent escalation of
commitment…
 Don’t look at other people
to set what you should do
 Continually remind yourself
of the costs
 Set limits on your
involvement and
commitment
 Focus on the quality of the
decision, not the quantity of
the outcome
 Stay vigilant
 Employee Involvement Model

Potential Involvement
Outcomes
 Better problem
Employee identification
Involvement  More/better
solutions
generated
Contingencies  Best choice more
of Involvement
likely
 Higher
decision
commitment

Source: Shane & Von Glinow, 2005

 Contingencies of Involvement
More employee involvement is better when:

Decision • Problem is new & complex

Structure (i.e non-programmed decision)

Knowledge • Employees have relevant knowledge

Source beyond leader

Decision • Employees would lack commitment

Commitment unless involved

Risk of • Norms support firm’s goals

Conflict • Employee agreement likely

Source: Shane & Von Glinow, 2005

 Characteristics of Creative
People
 Above average intelligence
 Persistence
 Relevant knowledge and experience
 Inventive thinking

Source: McShane & VonGinow, 2006

Creativity in Decision Making

The Creative Process

Preparation Incubation Insight Verification

• Education • Reflection • Breakthrough • Test
• Study • Thinking • “ah-hah!” • Check
• Knowledge • Consideration • “light turned on”
• Intelligence • Rest
• Persistence
 Creative Work Environments
 Learning orientation
 Encourage experimentation
 Tolerate mistakes

 Intrinsically motivating work

 Task significance, autonomy, feedback
 Open communication and sufficient
resources
 Team trust and project commitment

Source: McShane & VonGinow, 2006

 Creative Activities
Redefine Associative Cross-
the Problem Play Pollination

• Review • Storytelling • Diverse teams

abandoned
projects • Artistic • Information
activities sessions
• Explore issue
• Morphological • Internal
with other
people analysis tradeshows

Source: McShane & VonGinow, 2006

 Ten Mental “Locks” on
Creativity
1. Looking for the “right” 1. Fearing and avoiding failure.
answer.
3. Forgetting how to play.
3. Always trying to be logical.
5. Becoming too specialized.
5. Strictly following the rules.
7. Not wanting to look foolish.
7. Insisting on being practical.
9. Saying “I’m not creative.”
9. Avoiding ambiguity.

Source: Krietner, 2004

 Organizational Factors Impeding
Creativity

1. Expected evaluation
2. Surveillance
3. External motivators
4. Competition
5. Constrained choice

Source: Robbins, 2003